problem 1: Fred is an electrician. John is a builder who builds a large number of houses each year. John hires Fred to do the wiring of all of his houses. Fred has no time to work for anyone else except John. Is Fred an employee or an independent contractor?

problem 2: If Fred is driving from one of John’s houses to the other one to do some wiring and he runs over a small child, would John be liable for the Fred’s actions?

problem 3: Phillip hired Ace to collect a debt from Scott. He told Ace, "I'll leave the methods to you, however make sure you get the money." As it turns out, Ace is a violent person with a history of serious fights. Phillip could have discovered this however failed to check on Ace's background. When trying to collect the debt, Ace beat up Scott and injured him. Scott sued Phillip for damages. What outcome is likely and why?

problem 4: Sally is an attorney negotiating to purchase a large tract of land for V-Mart. V-Mart is an undisclosed principal in this case. If the seller of the land breaches the contract, can Sally sue them?

problem 5: Margaux and Sabrina were the best of personal friends and met for drinks at the local pub after work. Margaux is a CPA and partner in M and M CPA firm, and Sabrina works there as a receptionist and is not a CPA. While at the pub, they met up Spenser and Sabrina told Spenser that she could prepare his taxes as a CPA. Margaux winks in acknowledgement of the conversation. Afterward, Sabrina poorly prepares Spenser’s taxes. Spenser now wants to sue M and M CPAs for malpractice. Who is liable?

Case Problem:

Arthur Jensen, Inc., was a corporation engaged in the housing construction business. Arthur Jensen owned over half of the corporation’s stock and served as its president. Alaska Valuation Service (AVS) conducted housing appraisals for Jensen on many occasions over the years. When AVS took the orders for appraisals, it was not aware that it was dealing with a corporation. It believed that it was dealing directly with Jensen. Jensen never specifically informed AVS of his status as an agent for Arthur Jensen, Inc. AVS attempted to hold Jensen personally liable for the appraisal services. Is Jensen personally liable as an agent for an undisclosed principal?

problem A: Shelly wants to open a restaurant. After studying the different types of business ownership structures, Shelly decides she wants her business to be a sole proprietorship. What are some reasons which Shelly might have picked this type of business?

problem B: Earl and Pearl are partners in a travel agency. Earl dies. Is the partnership dissolved? Can Pearl still run the business?

problem C: Arthur King is the chief executive officer of Camelot, Inc., a close corporation.  He is as well the majority shareholder in the corporation. King knows that two lawsuits are about to be filed against Camelot. One pertains to an alleged breach of a contract to which Camelot was a party. King had been actively included in the negotiation of the terms of the contract. The other lawsuit which will be filed against Camelot pertains to an automobile accident allegedly caused by the negligence of Lance Allot, a Camelot employee. Allot was acting in the scope of his employment when the accident occurred. King is concerned that he could face personal liability for damages that might be awarded in these suits, if Camelot's assets prove inadequate to satisfy the damage awards. Should he be concerned?  Why or why not?

problem D: Tinker was a limited partner in Evers & Chance Limited Partnership. Evers and Chance were the firm's general partners. Tinker had invested $50,000 in the limited partnership. Evers and Chance had each invested $10,000. Originally, Evers and Chance had completed all of the managing of the partnership business. As time went on, though, Tinker became involved, all along with Evers and Chance, in management of the firm's business activities. After this change in responsibility for management had taken place, Evers (while in the course of partnership business) negligently caused crippling physical injury to Cobb. Suppose that Cobb's tort claim is a valid one worth at least $500,000, an amount easily in surplus of not only the initial contributions to the partnership however also the value of all partnership property and assets.  What is the extent of liability (if any) that Tinker, Evers, and Chance, respectively, might have to Cobb?

problem E: Legal Eagles law firm was founded as a general partnership. What would be some benefits for Legal Eagles to switch to a limited liability partnership?

Case Problem:

When friends reunite at a wedding, they reveal their plans for business ventures. Al and Amy, an unmarried couple, suggest opening a Thai restaurant. Al is a dentist and Amy is director of public relations for a publishing company. Amy will quit her job finally to manage the restaurant. They will hire a chef whose restaurant is about to close. Carl is a successful real estate agent who wants to open his own real estate firm. Bob has tried some business ventures, but all have failed, comprising a venture to manufacture ski racks for motorcycles. Dave and Donna, a newly married couple, plan to quit their jobs, move to Wyoming and open a software development business. They want the business to have few investors. They have lined up potential clients who will finance their initial efforts in return for the software customization.

problem i: What business forms should each of these individuals use for their business ventures?

problem ii: What additional problems do you want to ask to help you find out the best business forms for their ventures?